Owens & Minor
Annual Report 2006

Plain-text annual report

One Hundred Twenty-five Years of Service to the Healthcare Industry One Hundred Twenty-five Years of Service to the Healthcare Industry Owens &Minor, Inc. 125 Annual Report and Form 10-k Company Overview 2006 Proudly celebrating its 125th anniversary, Owens & Minor, Inc., a FORTUNE 500 company headquartered in Richmond, Virginia, is the leading distributor of medical and sur- gical supplies to the acute-care market, a sought-after healthcare supply-chain management company, and a national direct-to-consumer supplier of diabetes testing supplies.Thanks to strong organic growth and a strategic acquisition late in the year, revenues for Owens & Minor topped $5.5 billion in 2006, solidifying the company’s market leading position. Using its nationwide network of efficiently run distribution centers, the company serves hospitals, integrated healthcare systems, alternate-care facilities, the federal government and individuals by providing a diverse medical and surgical product and service offering. Owens & Minor leverages its operational efficiency, technology innovation and advanced supply-chain management services, enabling health- care providers to improve efficiency and lower costs across the entire medical supply chain. Annual Report 2006 Founded in Richmond in 1882, Owens & Minor continues to rely on its essential mission, vision and values to support an enduring culture that focuses on customer service excellence, teammate well-being, shareholder value, business integrity and social responsibility. Despite the daily demands of business, the company contributes time, energy and talent to the communities it serves by encouraging a culture of volunteerism and charitable giving among its teammates. Throughout its 125-year history of serving cus- tomers, Owens & Minor has always dedicated itself to delivering long-term value to shareholders.With strong operating performance and a consistent divi- dend policy, the company has produced a 13% total return over the last five years for its shareholders. Today, Owens & Minor common shares are traded on the New York Stock Exchange under the symbol OMI. As of December 31, 2006, there were approximately 40, 257,000 common shares outstanding. For more information, visit the com- pany’s Web site at www.owens-minor.com. Contents Financial Highlights . . . . . . . . . . . . . . . . 1 Letter to Shareholders . . . . . . . . . . . . . . . 2 Culture . . . . . . . . . . . . . . . . . . . . . . . . . 6 People . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Growth . . . . . . . . . . . . . . . . . . . . . . . . 10 Innovation . . . . . . . . . . . . . . . . . . . . . . 12 Board of Directors . . . . . . . . . . . . . . . . 14 Corporate Officers . . . . . . . . . . . . . . . . 15 Corporate Information . . . . . . . . . . . . . 16 Form 10-K . . . . . . . . . . . . . . . . . . . . . . 17 Mission Statement . . . . . Inside Back Cover Financial Highlights (in thousands, except ratios and per share data) Year ended December 31, 2006 2005 2004 Revenue(1) As reported: Net income(2)(3) Net income per common share - basic(2)(3) Net income per common share - diluted(2)(3) Cash dividends per common share Book value per common share at year-end Stock price per common share at year-end Shares of common stock outstanding Gross margin as a percent of revenue Operating earnings as a percent of revenue(2) Long term debt Average inventory turnover Days sales outstanding Operating cash flow $5,533,736 $4,822,414 $4,525,105 $ $ $ $ $ $ 48,752 1.22 1.20 0.60 13.60 31.27 40,257 $ $ $ $ $ $ 64,420 1.63 1.61 0.52 12.84 27.53 39,890 $ $ $ $ $ $ 60,500 1.55 1.53 0.44 11.65 28.17 39,519 10.8% 1.9% 10.7% 2.4% 10.2% 2.4% Percent Change 06/05 14.8% 05/04 6.6% (24.3%) (25.2%) (25.5%) 15.4% 5.9% 13.6% 0.9% 6.5% 5.2% 5.2% 18.2% 10.2% (2.3%) 0.9% $ 433,133 $ 204,418 $ 207,476 111.9% (1.5%) 8.9 30.5 9.8 26.3 9.9 26.5 $ (73,580) $ 135,374 $ 58,654 (1) In 2006, revenue included $282 million, resulting from the acquired acute-care medical and surgical supply business of McKesson Medical-Surgical Inc., a business unit of McKesson Corporation (McKesson acquisition). (2) In 2006, net income included $9.3 million, or $5.7 million net of tax, of charges related to the increase in the allowance for doubtful accounts receivable in the direct-to-consumer distribution business. Also, in 2006, net income included $2.6 million, or $1.6 million net of tax, of expenses related to the expensing of stock options in accordance with Statement of Financial Accounting Standards No. 123(R), Share-Based Payment, and $16.0 million, or $9.7 million net of tax, of dilution resulting from the McKesson acquisition. In 2005 and 2004, net income included software impairment charges of $3.5 million and $1.0 million, or $2.1 million and $0.6 million net of tax. (3) In 2006, net income included an $11.4 million loss on the early extinguishment of debt, or $7.0 million net of tax. REVENUE (Dollars in billions) $5.5 $4.8 $4.5 NET INCOME (Dollars in millions) $64.4 $60.5 $48.8 DILUTED EPS (Dollars per share) DIVIDENDS (Dollars per share) $1.61 $1.53 $0.60 $1.20 $0.52 $0.44 ’04 ’05 ’06 ’04 ’05 ’06 ’04 ’05 ’06 ’04 ’05 ’06 Annual Report 2006 1 Letter to Shareholders Craig R. Smith President & Chief Executive Officer Dear Shareholders, Teammates, and Friends: A nother year has passed for Owens & Minor, and as we open the door to 2007, we proudly begin the celebration of our 125th anniversary.We have come a long way from supplying the 19th-century citizens of Richmond,Virginia, with tonics and elixirs.Today we are the market leader in serving the needs of the nation’s hospitals with unmatched distribution services, advanced supply- chain management tech- niques, clinical inventory management, technology innovation, and outsourcing and consulting services. “I am very proud that Owens & Minor has made its 125-year journey without sacrificing what is most important — our culture.” In today’s fast-paced economy, it is a real milestone to reach a 125th anniversary with essentially the same company name and the enduring leadership of the founding family — in our case, the Minor family. But we have done more than just survive, we have thrived. Owens & Minor is now the leading distributor of medical and surgical supplies to the nation’s acute-care market.We have been recognized in recent years for our technology leadership and for our ethical business practices. Over the years, we have worked every day to fulfill an important element of our mission, vision and values — delivering long-term value to our shareholders. Some years may be more difficult than others, but we know that our performance over the long term has benefited our investors.The year 2006 was no exception.Though we faced some obstacles along the way, it was a good year for our shareholders.With a closing price on December 29, 2006, of $31.27, we saw a 14% improve- ment in our share price over the previous year. Our total return for the year was 16%, while our five-year total return was 13%. Looking back at 2006, we saw significant activity in just about every area of our company.We moved into a new Home Office.We refinanced $200 million in bonds at a more favorable rate.We renewed agreements with two of our important GPO partners.We renegotiated our out- sourcing arrangement with Perot Systems Corporation.We weathered some storms in our direct-to-consumer business. Organic revenue growth was the strongest we have reported in at least ten years, and late in the year we acquired the acute-care business of McKesson Medical- Surgical Inc. All of this activity sets the stage for us in 2007 and 2008 to focus on serving our customers, improving our processes, creating better services and growing our company. Our teammates, new and veteran alike, are focused on delivering the difference for our customers. We began the year by moving to our new Home Office facility, which finally allows our team to work under one roof. Designed with suggestions from our teammates, the building gives us all a comfortable, collaborative work environment that facilitates our culture of teamwork.The new Back in 1882, Owens & Minor served the healthcare industry from a storefront in downtown Richmond,Virginia. The Owens & Minor company baseball team of 1907 was a great example of early teamwork. Using a fleet of leased trucks, Owens & Minor serves hospitals around the nation. Annual Report 2006 3 building also houses a real campus for Owens & Minor University, or OMU. This in-house training facility now has sufficient classrooms and meeting space for large and small groups of students.We are very pleased that OMU is now extending its course offerings to our customers, providing classes in supply-chain management. We refinanced $200 million in bonds at a more favorable rate in April 2006, lowering the borrowing rate from 8.5% to 6.35%. For this bond issue, we were given investment grade ratings from Fitch Ratings and from Standard & Poor’s consistent with our existing corporate credit rating. We renewed agreements with two of our important GPO partners, Novation and Broadlane, and completed the associated customer sign-ups during the year.Along with a new Premier contract signed late in 2005, we now have agreements in place for approximately 70% of our business. By extending our agreement with Perot Systems Corporation in 2006, we cemented our information technology (IT) outsourcing relationship until 2014 and committed to an important mainframe migra- tion project that will improve our flexibility and capacity for growth. Perot Systems also played a crucial role in the fourth quarter, as we began the conversion of the acquired McKesson business, by helping us link our systems to those of our new customers. Unfortunately, we experienced some stormy weather with our direct-to-consumer business, following a period of rapid growth.After adding teammates with expertise in day-to-day operations and accounts receivable portfolio management, we discovered the need to increase our allowance for doubtful accounts receivable for this effort.Although we were disappointed with third and fourth quarter results, we are now focused on daily blocking and tackling, which allows us to efficiently run the business.We have become the third largest player in the direct-to- consumer mail-order diabetes supply sector in less than two years. We are extremely excited about the acquisition of the McKesson acute-care business.We anticipate that it will add in excess of $900 million in new business.At this writing, we are on schedule with our aggressive, six-month conversion plan, under which we are paying McKesson to serve our new customers until they are transitioned to Owens & Minor. With this important acquisition, Owens & Minor is now the leading provider of medical and surgical supply distribution to the acute-care sector. This added scale and volume will allow us to operate even more Running an efficient warehousing system is as important today, as it was several generations ago. Owens & Minor embarked on a period of rapid growth after the acquisition of the Bodeker Drug Company in 1955. Once a drug wholesaler, Owens & Minor now concentrates on the distribution of medical and surgical supplies. Owens & Minor began trading on the NYSE under the symbol OMI in1988. 4 Annual Report 2006 efficiently and effectively once the conversion is completed.With the McKesson acquisition and the re-signing of much of our business, we are well positioned to work with our hospital customers and suppliers to improve the cost and efficiency of the healthcare supply chain. In turn, executives of large healthcare systems know that by working with Owens & Minor, they have the opportunity to collaborate with a trusted partner to reach their supply-chain goals. I am very proud that Owens & Minor has made its 125-year journey without sacrificing what is most important — our culture.We were founded on the principles of business integrity, exceptional customer service, and caring for our teammates and our communities. Even today, in our fast-paced digital world, we take time to care for our customers and celebrate our teammates and their successes.We have been very fortu- nate over the years — through good times and bad, through highs and lows — to effectively manage our company with the highest ethics and integrity, and to provide real value for our shareholders.This continues to be our culture and way of life here at Owens & Minor.We manage our business for the long term and intend to do so for another 125 years. Happy Anniversary, Owens & Minor! Sincerely, Craig R. Smith President & CEO Owens & Minor By upgrading our distribution centers and deploying technology throughout, we have developed a highly efficient warehousing system. Owens & Minor believes in supporting the communities it serves and encourages teammates to volunteer with a variety of organizations. In 2006, we acquired the acute-care business of McKesson Medical-Surgical Inc. Owens & Minor moved into its new Home Office in 2006. Annual Report 2006 5 The Owens & Minor Culture 125 earns 97% customer satisfaction ratings and teammates that stay with our At Owens & Minor, we have long prided ourselves on the kind of culture that company for many years. Now and into the future, we are determined to thrive. When, 125 years ago, a Richmond whole sale drug company opened its doors on East Main Street for the very first time, a company — as well as a culture — was born.Today, the founding principles of Owens & Minor remain unchanged. Founders Otho O. Owens and George Gilmer Minor conducted their business with honesty and integrity, and made teammate well-being a top priority, creating a true team culture. Serving customers respectfully and efficiently — and earning their trust — is another principle that has stood the test of time at Owens & Minor. Having a strong sense of social responsibility, volunteering and giving back to the communi- ties we serve, are also important traditions.Through the years, our customers, as well as our markets, products and business strategies, have gone through remarkable 6 Annual Report 2006 country’s leading medical and surgical supply distributor in the acute-care sector.Also in 2006, the company moved into a new 160,000 square foot Home Office on 25 acres. The move represents a continued investment in the well-being of our Home Office teammates, who can now work together under one roof, as well as our teammates around the country who visit the Home Office for training and meetings. At Owens & Minor, we pride ourselves on a business culture that earns 97% customer satisfaction ratings and inspires teammate loyalty. Now and into the future, we are determined to thrive.We will con- tinue to stand by our customers as we move with the changing times, never losing sight of what got us here to begin with: a fierce dedica- tion to integrity, a commitment to delivering value, and unflinching support from our teammates. Otho O. Owens and George Gilmer Minor, once competitors, joined together in 1882 to create the Owens & Minor Drug Company. changes, but our cultural compass has been our steady guide. For more than 12 decades, we have remained vital by continually reinventing ourselves. A New Chapter Building upon our rich past, 2006 marked yet another historic year. With the acquisition of the acute- care distribution business of McKesson Medical-Surgical Inc., Owens & Minor now stands as the The People of Owens & Minor Last year gave Owens & Minor teammates the opportunity to showcase their dedication and strong work ethic like never before. With the McKesson acquisition, an energized workforce is now managing more business per person than at any other time in our history. Throughout our history, Owens & Minor has relied on inspired and trusted leadership. Early visionaries, like stock-boy-turned-company presi- dent Conway M. Knox, and gener- ations of Minor family members, like G. Gilmer Minor, Jr., president from 1947-1976, helped build the company into a national power- house. His son, our current Chairman, G. Gilmer Minor, III, offered strong, steady leadership for nearly two decades. But it is our thousands of teammates, past and present, whether working the front- lines in our distribution centers or selling our technology programs and services, who are the true reason for our success. Owens & Minor has faced some challenges through the years. For example, in 1992 the company made a bold decision to sell its drug division — the bedrock of the busi- ness for 110 years.Two years later in 1994, the company acquired Stuart Medical, Inc., greatly en- hancing our national distribution 8 Annual Report 2006 Making a New Era Possible In 2006, Owens & Minor team- mates showcased their strong work ethic like never before.With the McKesson acquisition, an ener- gized workforce is now managing more business per person than at any other time in our history. Throughout this transition process, which included training new teammates to help accommo- date the new business, we contin- ued to strive for strong service levels and highly satisfied cus- tomers, both new and old. Our company training facility, Owens & Minor University, or OMU, has grown from a modest start to a program offering a full slate of skill-building courses to teammates and customers alike. At Owens & Minor, we remain dedi- cated to ensuring the satisfaction of our teammates.We know that the support we show our team- mates leads to the delivery of exceptional customer service, and that means a thriving business. In distribution, efficiency counts. Owens & Minor has always made the most of available warehouse space and teammate time and talent to turn inventory quickly. capabilities. Subsequently in 1998, the cancellation of a major cus- tomer contract resulted in a substantial revenue loss, which Owens & Minor essentially replaced within a year by signing new customer agreements. Despite these hurdles, we have held fast to our beliefs, teaching generations of teammates how to provide the best possible service. Customers have rewarded our dedication to service with decades of loyalty. Annual Report 2006 9 Owens & Minor and Growth Today, Owens & Minor continues to rely on our financial strength, a strong core business, and a strategic focus on the future of healthcare. For 125 years at Owens & Minor, we have continually applied the essential business values of responsible financial stew- ardship, careful investment of our resources, and strategically-focused growth.Throughout our journey from a storefront drug wholesaler to the largest medical and surgical supply distributor in the acute-care sector, growth has defined our company in many ways. Our history is rich with milestones.With our first major acquisition, the Bodeker Drug Company, we established a tradi- tion of thoughtful building. A period of acquisition soon fol- lowed; from 1964 to 1981 we acquired ten companies. By 1970, we had made our debut in the medical and surgical supply distribution business, and in 1978 our revenues topped $100 million. With the 1992 sale of our drug division, medical and surgical supply distribution rose to become the core business line. Despite some setbacks, we have expanded and prospered. Owens & Minor’s asset manage- ment strategies have continued to generate a healthy operating cash flow and overall financial strength. We work daily to maintain a very low days sales outstanding (DSO) – the best performance in our market sector — and to keep our inventory 10 Annual Report 2006 Owens & Minor, and continues our long tradition of bringing in like- minded companies to help us grow. Also in 2006, we renewed our agreements with important group purchasing organization (GPO) partners, Novation and Broadlane. Combined with the U.S. Depart- ment of Defense and Premier Inc. contracts signed in the second half of 2005, we have signed a healthy percentage of our business for the near term. With an eye to the future, we are also reaching out to the increas- ing number of individual customers who are consuming medical sup- plies in their homes. In two years, since the 2005 acquisition of Access Diabetic Supply, LLC, we have nearly tripled the size of our direct-to-consumer supplier of diabetes testing supplies. Our busi- ness is now the third largest mail- order supplier of diabetes supplies, primarily blood glucose monitors and test strips, directly to con- sumers in the home. In addition, we are providing more clinical asset-management programs to our customers.We are leveraging our advanced technolo- gy infrastructure, discipline and experience to offer our hospital customers ways to monitor and control costly and sophisticated clinical inventory, saving them valuable time and resources. Even today, our drivers are important customer service representatives for the company, as they interact with our customers every day. turns high. Because of our res-pon- sible financial stewardship, we took advantage of favorable market conditions in 2006 and refinanced $200 million in bonds, lowering our interest rate from 8.5% to 6.35%. Today, with 2006 revenues of $5.5 billion, Owens & Minor stands more ready than ever to respond and grow in changing times. Setting the Stage for the Next 125 Years While our unwavering focus on our core business values and practices has enabled us to reach our 125th anniversary, the 2006 McKesson acquisition is also an important new chapter in our growth story.With new customers around the nation, as well as new teammates, that business now represents in excess of $900 million in new revenue.This acquisition is a catalyst for the future of Owens & Minor and Innovation For years, Owens & Minor has been recognized as the industry leader for our innovative use of technology, and we have taken great strides to improve our service capabilities to our customers. At Owens & Minor, intelligent use of the most advanced technology available drives our success. In fact, we were early adopters of comput- er technology. For decades, we’ve offered customers and suppliers innovations that create cost-effec- tive, streamlined supply-chain solu- tions.The advanced technologies we use create incredible efficiencies without a corresponding need for an increase in manpower. Our innovations win industry accolades but, more importantly, they improve our service capabili- ties to our customers. In 2002, we expanded our offerings to cus- tomers with supply-chain consult- ing and outsourcing through OMSolutionsSM.We also enlisted Perot Systems as our IT outsourc- ing partner in 1998, creating con- siderable internal efficiencies. Our earliest supply-chain management programs, CostTrackSM and WISDOMSM, continue to bring enormous benefit as premier activity-based management and web-based support systems. In 12 Annual Report 2006 tools to help lower overall costs in the supply chain and reduce inefficiencies by avoiding product expirations and waste.We also offer our customers value through a private-label line of products called MediChoice®. In 2006, we consolidated our hospital asset-management technol- ogy onto an integrated Web-based platform, which enables our customers to efficiently track and replenish inventories, across a broad range of medical and surgical supplies. Our healthcare customers can now access all of our clinical asset management tools through this new, consolidated platform. At Owens & Minor, we recog- nize that the healthcare sector will continue to evolve and grow in its complexity. In response, we will continue to provide the most inno- vative supply-chain management tools. Now and into the future, we will leverage our leading position in the acute-care market to serve our customers, create shareholder value and invest in our most valued asset — our teammates. Teamwork, technology and customer service excellence have enabled us to meet the needs of our customers. addition, operating rooms across the nation have derived savings and critical management capabilities with our QSightTM, SurgiTrack® and PANDAC® tools. Developing Tools for the Next Generation of Customers Healthcare costs are rising faster than the rate of inflation, and hospital executives are looking for ways to control overall supply- chain costs. At Owens & Minor, one strategy is to apply our existing technology to other areas of medical distribution and inventory management, such as catheteriza- tion and radiology labs. Increasingly, customers can use our innovative Annual Report 2006 13 Front Row, seated, left to right: Richard E. Fogg, James B.Farinholt, Jr., James E. Rogers, G. Gilmer Minor, III,Anne Marie Whittemore,A.Marshall Acuff, Jr. Back Row, left to right: Eddie N. Moore, Jr., Peter S. Redding, Craig R. Smith, James E. Ukrop, John T. Crotty, J. Alfred Broaddus, Jr. Board of Directors G. Gilmer Minor, III (66) 1* Chairman & Retired CEO, Owens & Minor, Inc. A. Marshall Acuff, Jr. (67)1,3,5* Retired Senior Vice President & Managing Director, Salomon Smith Barney, Inc. J. Alfred Broaddus, Jr. (67) 3,5 Retired President, Federal Reserve Bank of Richmond John T. Crotty (69) 2,4* Managing Partner, CroBern Management Partnership President, CroBern, Inc. James B. Farinholt, Jr. (72)2,4 Managing Director, Tall Oaks Capital Partners, LLC Richard E. Fogg (66) 1,2*,4 Retired Partner, PricewaterhouseCoopers LLP Eddie N. Moore, Jr. (59) 2,5 President, Virginia State University Peter S. Redding (68) 2,4 Retired President & CEO, Standard Register Company James E. Rogers (61) 1 Lead Director, Owens & Minor, Inc. President, SCI Investors Inc. Craig R. Smith (55) 1,4 President & CEO, Owens & Minor, Inc. James E. Ukrop (69) 3,5 Chairman, Ukrop’s Super Markets, Inc. Chairman, First Market Bank Anne Marie Whittemore (60)1, 3*,5 Partner, McGuireWoods LLP Board Committees: 1Executive Committee, 2Audit Committee, 3Compensation & Benefits Committee, 4Strategic Planning Committee, 5Governance & Nominating Committee, *Denotes Chairman 14 Annual Report 2006 Richard F. Bozard (59) Vice President,Treasurer Vice President,Treasurer since 1991. Mr. Bozard has been with the company since 1988. Olwen B. Cape (57) Vice President, Controller Vice President, Controller since 1997. Ms. Cape has been with the company since 1997. Hugh F. Gouldthorpe, Jr. (68) Vice President, Quality & Communications Vice President, Quality & Communications since 1993. Mr. Gouldthorpe has been with the company since 1986. Scott W. Perkins (50) Group Vice President, Sales & Distribution Group Vice President, Sales & Distribution – West, since October 2005. Previously, Mr. Perkins served as Senior Vice President, Sales & Distribution from January to October 2005. Prior to that, he served as Regional Vice President – West, from March to December 2004, and an Area Vice President from 2002 to 2004. Mr. Perkins has been with Owens & Minor since 1989. W. Marshall Simpson (38) Group Vice President, Sales & Distribution Group Vice President, Sales & Distribution – East, since October 2005. Previously, Mr. Simpson served as Regional Vice President from 2004 to October 2005. Prior to that, Mr. Simpson served as Operating Vice President of Corporate Accounts from 2003 to 2004, and as Operating Vice President of Business Integration from 2002 to 2003. Mr. Simpson has been with the company since 1991. Numbers inside parentheses indicate age. Corporate Officers Craig R. Smith (55) President & Chief Executive Officer President since 1999 and Chief Executive Officer since July 2005. Mr. Smith has been with the company since 1989. Charles C. Colpo (49) Senior Vice President, Operations Senior Vice President, Operations since 1999 and Senior Vice President, Operations & Technology from April 2005 to July 2006. Mr. Colpo has been with the company since 1981. Erika T. Davis (43) Senior Vice President, Human Resources Senior Vice President, Human Resources since 2001. From 1999 to 2001, Ms. Davis was Vice President of Human Resources. Ms. Davis has been with the company since 1993. Grace R. den Hartog (55) Senior Vice President, General Counsel & Corporate Secretary Senior Vice President, General Counsel & Corporate Secretary since 2003. Ms. den Hartog previously served as a Partner of McGuire Woods LLP from 1990 to 2003. Jeffrey Kaczka (47) Senior Vice President, Chief Financial Officer Senior Vice President, Chief Financial Officer since 2001. Previously, Mr. Kaczka served as Senior Vice President, Chief Financial Officer for Allied Worldwide, Inc. from 1999 to 2001. Richard W. Mears (46) Senior Vice President, Chief Information Officer Senior Vice President, Chief Information Officer since June 2005. Previously, Mr. Mears was an Executive Director with Perot Systems from 2003 to June 2005, and an account executive from 1998 to 2003. Mark A.Van Sumeren (49) Senior Vice President, Business Development Senior Vice President, Business Development since July 2006. Senior Vice President, OMSolutionsSM from 2003 to July 2006. Mr.Van Sumeren previously served as Vice President for Cap Gemini Ernst & Young from 2000 to 2003. Annual Report 2006 15 Corporate Information Annual Meeting The annual meeting of Owens & Minor, Inc.’s shareholders will be held at 10:00 a.m. on Friday, April 27, 2007, at Owens & Minor, Inc., 9120 Lockwood Boulevard, Mechanicsville,Virginia, 23116. Transfer Agent, Registrar and Dividend Disbursing Agent The Bank of New York Investor Services Department P.O. Box 11258 Church Street Station New York, NY 10286-1258 800-524-4458 shareowners@bankofny.com BuyDIRECTSM Stock Purchase and Dividend Reinvestment Plan Our transfer agent,The Bank of New York, offers a Direct Purchase and Sale Plan for shares of Owens & Minor, Inc. common stock known as the BuyDIRECTSM Plan.The BuyDIRECTSM Plan provides registered shareholders of Owens & Minor and interested first-time investors a way to buy and sell shares of Owens & Minor common stock. Inquiries should be directed to The Bank of New York (see contact information above). Shareholder Records Direct correspondence concerning Owens & Minor, Inc. stock holdings or change of address to The Bank of New York’s Investor Services Department (listed above). Direct correspondence concerning lost or missing dividend checks to: The Bank of New York Receive and Deliver Department P.O. Box 11002 Church Street Station New York, NY 10286-1002 Duplicate Mailings When a shareholder owns shares in more than one account or when several shareholders live at the same address, they may receive multiple copies of annual reports.To eliminate multiple mailings, please write to the transfer agent. Counsel Hunton & Williams Richmond,Virginia Independent Auditors KPMG LLP Richmond,Virginia Press Releases Owens & Minor, Inc.’s press releases are available at www.owens-minor.com. Communications and Investor Relations 804-723-7000 Information for Investors The company files annual, quarterly and current reports, information statements and other information with the Securities and Exchange Commission (SEC).The public may read and copy any materials that the company files with the SEC at the SEC’s Public Reference Room at 100 F Street, N.E.,Washington, D.C. 20549.The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains an Internet site that contains reports, proxy and information statements, and other infor- mation regarding issuers that file electronically with the SEC.The address of that site is http://www.sec.gov.The address of the company’s Internet Web site is www.owens- minor.com.Through a link to the SEC’s Internet site on the Investor Relations portion of our Web site we make available all of our filings with the SEC, including our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports, as well as beneficial ownership reports filed with the SEC by directors, officers and other reporting per- sons relating to holdings in Owens & Minor, Inc. securities. This information is available as soon as the filing is accepted by the SEC. Corporate Governance The company’s Bylaws, Corporate Governance Guidelines, Code of Honor and the charters of the Audit, Compensation & Benefits, and Governance & Nominating Committees are available on the company’s Internet Web site at www.owens-minor.com and are available in print to any shareholder upon request by writing to: Corporate Secretary Owens & Minor, Inc. 9120 Lockwood Boulevard Mechanicsville,Virginia 23116 Communications with the Board of Directors The Board of Directors has approved a process for shareholders to send communications to the Board. Shareholders can send written communications to the Board, any committee of the Board, the Lead Director or any other individual director at the following address: P.O. Box 26383, Richmond,Virginia 23260. All communi- cations will be relayed directly to the applicable director(s), except for communications screened for security purposes. Certifications The company’s chief executive officer certified to the New York Stock Exchange (NYSE) within 30 days after the company’s 2006 Annual Meeting of Shareholders that he was not aware of any violation by the company of NYSE corporate governance listing standards.The company also filed with the SEC as exhibits 31.1, 31.2, 32.1 and 32.2 to its Annual Report on Form 10-K for the year ended December 31, 2006, certifications by its chief executive officer and chief financial officer. 16 Annual Report 2006 Mission To create consistent value for our customers and supply-chain partners that will maximize shareholder value and long-term earnings growth; we will do this by managing our business with integrity and the highest ethical standards, while acting in a socially responsible manner with particular emphasis on the well-being of our teammates and the communities we serve. Vision To be a world class provider of supply-chain management solutions to the selected segments of the healthcare industry we serve. Values We believe in high integrity as the guiding principle of doing business. We believe in our teammates and their well-being. We believe in providing superior customer service. We believe in supporting the communities we serve. We believe in delivering long-term value to our shareholders. Annual Report 2006 125 One Hundred Twenty-five Years of Service to the Healthcare Industry Owens & Minor, Inc. • Corporate Office • 804-723-7000 • www.owens-minor.com Street Address 9120 Lockwood Boulevard Mechanicsville,Virginia 23116 Mailing Address Post Office Box 27626 Richmond,Virginia 23261-7626 

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